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<\/a><\/figure>\n<\/div>\n\n\nThe Patreon website allows people to support “creators” by pledging a certain payment per month. In exchange, the creator may (but is not obligated to) offer various “rewards” for said contributions. The question is are Patreon payments considered taxable income for income tax filing purposes.<\/p>\n\n\n\n
Is Patreon Tax Deductible?<\/h2>\n\n\n\nMost Patreon Contributions Not Tax Deductible<\/h3>\n\n\n\n
Let’s start with the easier question. No matter how much you like artists, and no matter how much supporting them\u00a0feels<\/em> like a charitable donation, such contributions are typically not tax-deductible contributions in the eyes of the IRS. <\/p>\n\n\n\n IRS Publication 526<\/a> deals with charitable contributions and it specifically says,<\/p>\n\n\n\n “You cannot deduct contributions to individuals including… contributions to individuals who are needy or worthy.”<\/p>\n<\/blockquote>\n\n\n\n Is Patreon legit as a charity? Just because something seems like a charity, or an organization calls itself a charity, doesn’t mean contributions to it are tax deductible. The gold standard of charitable contributions is a 501(c)(3) organization. These organizations submit forms to the IRS claiming they are a charity and keep those forms up to date each year. In exchange the IRS considers contributions to 501(c)(3)s to be charitable contributions.<\/p>\n\n\n\n If the recipient of the contributions is established as a 501(c)(3) organization with a valid Tax ID number<\/a> for that organization then contributions may<\/em> be tax deductible. For Patreon to be fully deductible charity contributions, the person making the contribution cannot receive any benefit in exchange. Thus, even Patreon contributions made to charitable organizations may not be tax deductible if any of the rewards received by the contributor are of value. In that case, the value of any benefits received may not be deducted.<\/p>\n\n\n\n So, for example, if you do manage to find a qualified organization on Patreon and contribute $50 per month, but you get a t-shirt worth $10 each month, you could only deduct $40 per month as a charitable contribution.<\/p>\n\n\n\n Remember, the newest tax law increased the standard tax deduction<\/a> and made deductions for charitable contributions much less useful as a way to reduce taxes for many taxpayers.<\/p>\n\n\n\n To find out are Patreon donations taxable, we turn to the tax code itself.<\/p>\n\n\n\n The overriding section of a tax code says,<\/p>\n\n\n\n “Except as otherwise provided… income means all income from whatever source derived.”<\/p>\n<\/blockquote>\n\n\n\n In other words, EVERYTHING is considered income for tax purposes unless it fits under a defined exception, including Patreon earnings. Also, gambling winnings, selling drugs, if you got money for selling your kidney, it doesn’t matter, income from any source, legal or illegal, online, offline, traditional, or new economy, all counts as income. Criminals that can’t be convicted of their crimes are often sent to prison anyway by being convicted of tax evasion since they didn’t report any income from their criminal affairs.<\/p>\n\n\n\n The question is whether or not the earnings from Patreon are taxable <\/em>income.<\/p>\n\n\n\n At first blush, this makes Patreon payments taxable. It also makes Patreon’s cut, or service fee, a business expense, if you are running a small business and filing a Schedule C. The things that are exempt from being income are very limited. Almost none of them can even come close to being stretched to allow Patreon contributions to be non-taxable.<\/p>\n\n\n\n Most of this would apply to Patreon alternatives<\/a> as well.<\/p>\n\n\n\n The one exception is gifts.<\/em> Gifts <\/em>are one of the things that is excepted from being income. So, if the contribution through Patreon is a gift, then it is not taxable. If it is ANYTHING ELSE it is taxable. <\/strong>(Note: there is such a thing as a gift tax. However, gift tax is paid by the person giving the gift, not the recipient, but only if it exceeds the annual gift tax limit.)<\/p>\n\n\n\n Here is the really important part though, GIFTS are tax-free, DONATIONS are not.<\/p>\n\n\n\n This is the sticky part. A gift only counts as a gift if you get nothing for it. If you get something in return, no matter how small, then it is not a gift. And, if it is not a gift, then it is, unfortunately, taxable income.<\/p>\n\n\n\n Patreon by its very nature is about an artist or a creator DOING SOMETHING which is supported by others. That is income, even if the contributor doesn’t specifically “get” anything, the fact that you produced the podcast in exchange for those contributions means it’s taxable income, no matter how worthy or noble.<\/p>\n\n\n\n Remember, the exception for income purposes here is GIFTS<\/span> not DONATIONS<\/span>. <\/p>\n\n\n\n You, an individual, cannot receive tax-free donations, you can only receive gifts. The distinction matters. Grandma giving you $200 because it’s your birthday is a gift (you did nothing, she expects nothing.) A $20 monthly contribution for your online comic is not a gift (you did something, contributors expect the comic will be made.)<\/p>\n\n\n\n Note: Although this is not spelled out anywhere, the IRS is more likely to believe something is a gift when it comes from someone you have an association with. One total stranger handing you money as a gift if believable, but 50 total strangers handing over cash and expecting nothing in return? That’s a tougher sell.<\/p>\n\n\n\n So, is Patreon considered a donation?<\/p>\n\n\n\n For real world purposes,\u00a0this all comes down to what gets reported to the IRS. If Patreon sends you a 1099-K or other tax reporting\u00a0form for filing your taxes<\/a>, that means they reported that amount to the IRS as income. The IRS will assume\u00a0that these payments are income, and their computers will flag your return if the income you report doesn’t match.<\/p>\n\n\n\n Pretty much the gold standard for reporting to the IRS is if somone else reports your stuff to the IRS as well. So, if Patreon reports your money, then you need to as well.<\/p>\n\n\n\n Patreon only sends 1099-K forms to people who earn more than $20,000 in the calendar year. Certain states have laws that require a 1099-K from Patreon for lower amounts. Residents of Illinois get a 1099-K for any amount over $1,000 in a year. Residents in Maryland, Massachusetts, Vermont, and Virginia all get 1099-K forms for any amount over $600 in a year. <\/p>\n\n\n\n If you get a 1099-K from Patreon, the IRS got a 1099-K with your name on it from Patreon. In this case you MUST report the income, even if you, or your tax professional, figure out a way to make such income non-taxable.<\/p>\n\n\n\n Even if Patreon does NOT report your payments, they are technically still taxable, but whether anyone ever notices is a whole other question. I mean if they forgot, maybe you forgot. The IRS audits a really low percentage of taxpayers<\/a>, and thanks to budget cuts, it’s about to get even lower. So, in this case, if you didn’t include your Patreon contributions because you, in good faith,\u00a0consider them\u00a0gifts, and\u00a0no one ever says otherwise, then, you are correct, by default, but that’s a risk you’ll have to take.<\/p>\n\n\n\n Eventually, someone will take this to tax court, and we’ll get an official answer.<\/p>\n\n\n\n The best bet\u00a0then is to keep careful track of all your expenses because you can deduct them to help with the additional taxes on your Patreon income. You may not want to be a business, but being one is your best defense against having to pay taxes on your Patron income. As a business, you don’t have to match up your expenses to particular things. So, if you are, say, a writer or artist on Patreon and you set up a business, you can deduct all your expenses from paper, brushes, to paint, and even your website hosting fees.<\/p>\n\n\n\n\n
Does Patreon Count as a Charity?<\/h3>\n\n\n\n
Is Money from Patreon Income Taxable?<\/h2>\n\n\n\n
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Are contributions from Patreon considered gifts?<\/h3>\n\n\n\n
What Qualifies as a Gift?<\/h2>\n\n\n\n
Are Patreon Donations Tax Deductible<\/h3>\n\n\n\n
Does Patreon Report to the IRS?<\/h3>\n\n\n\n
Offset Patreon Donations and Income with Small Business Tax Deductions.<\/h3>\n\n\n\n